Remuneration Transparency – Pay Secrecy Clauses Now Banned
On 6 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (Act) was implemented into Australian law. The changes introduced by the Act are substantial and are considered to be the most significant reforms to employment law in Australia since the Fair Work Act 2009 (Cth) (FW Act) was introduced over a decade ago.
The Act sees the introduction of several changes to the employment law landscape with amendments to the law targeted at promoting job security, flexibility, and equality for individual employees. One key area of amendment is with regards to “pay secrecy” clauses.
What is a Pay Secrecy Clause?
A pay secrecy clause is a common inclusion in most employment contracts. The clause will generally provide that an employee’s remuneration is confidential and prohibits employees from disclosing, discussing and/or comparing salaries with one another. Breaches of those clauses have previously seen employers have a valid and lawful reason to institute disciplinary action against an employee (depending on the circumstances of each specific case).
Secret no more…
However, the Act now makes it a workplace right for employees to disclose (or not disclose) information regarding their renumeration and terms and conditions of employment required to calculate their renumeration i.e., hours worked, on-call/shift-work requirements, sales numbers.
By making this a workplace right, it means that employees are protected from having adverse action taken against them for making such disclosures. Further, employees are now entitled to make general protections claim if their employer takes adverse action against them for having exercised this workplace right.
Dates to be aware of
These amendments apply to employment contracts that have been entered into on or after 7 December 2022 i.e., all contracts entered into on or after 7 December 2022 must not contain pay secrecy clauses and if they do, they cannot be enforced.
With respect to employment contracts entered into before 7 December 2022, the Act and its amendments to the Fair Work Act have no immediate effect i.e., the employees are still required to comply with any pay secrecy clauses in their contracts. However, once the contract is varied, it cannot include a pay secrecy clause i.e., once the employee receives a pay increase, promotion or other change in their role, the pay secrecy clause will not apply from the time of that variation.
The Act allows employers a grace period of six-months to update employment contracts. As of 7 June 2023, employers who enter into contracts/agreements that include pay secrecy provisions can be held liable for penalties of up to $66,600 per contravention.
Employers are highly advised to seek guidance from our Workplace team, to ensure they are meeting their obligations, complying with the new legislative amendments, and protected from potential liability. Employers are strongly encouraged to use these amendments as a catalyst to:
- Review their current employment contracts to confirm if they compliant;
- Seek advice on any amendments required to their employment contracts and workplace policies; and
- Assess any gaps in their remuneration models to ensure there are no grounds to claim that salaries are based on protected characteristics such as gender, age, race etc.
*This article was prepared with the assistance of Isabella Turner*
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